In a new post -- that he says he wrote during a sleepless
night at 4:30 in the morning -- Paul Krugman writes that he's mainly been in
the camp that can't explain the surge in gold, but that there
might be something logical to it.

His post is fairly wonkish (as he says), but his conclusion is
that gold's soaring price has nothing to do with inflation and
nothing to do with people viewing it as a currency, and nothing,
even, to do with paper currency "debasement." Instead, it's
perfectly consistent with low growth expectations and deflation:

The logic, if you think about it, is pretty intuitive: with lower
interest rates, it makes more sense to hoard gold now and push
its actual use further into the future, which means higher prices
in the short run and the near future.

But suppose this is the right story, or at least a good part of
the story, of gold prices. If so, just about everything you read
about what gold prices mean is wrong.

For this is essentially a
“real” story about gold, in which the price has risen because
expected returns on other investments have fallen; it is not,
repeat not, a story about inflation expectations. Not only are
surging gold prices not a sign of severe inflation just around
the corner, they’re actually the result of a persistently
depressed economy stuck in a liquidity trap — an economy that
basically faces the threat of Japanese-style deflation, not
Weimar-style inflation. So people who bought gold
because they believed that inflation was around the corner were
right for the wrong reasons.